Performance Management Myths Debunked

Wharton’s Peter Cappelli and Martin Conyon took a deep dive into performance management data from a large U.S. corporation between 2001 and 2007.[i] They looked at performance scores and associated employment outcomes over these years. They found that several myths about performance management simply aren’t true. Here is what they learned:

Myth 1: Assessment scores don’t vary much – most everyone gets an above average score and few employees, if any, get poor scores. In fact, they found that scores varied greatly across individuals. Even with that variation, however, performance distribution looked like a right-leaning normal distribution curve, reflecting an “upward bias” or “halo effect” with performance ratings.

Myth 2: People who are good performers tend always to be good performers, poor performers tend always to be bad, and the workforce is made up of a stable group of A, B, and C players. Not true. In the company they studied, there was little evidence of this. They wrote, “In fact, knowing this year’s scores explained only one-third of next year’s scores for the same employees. Changing mangers didn’t appear to have any consistent effect on scores either, contrary to the view that supervisors get cozy with subordinates and give them higher scores over time. There is simply no support for the simple idea that the workforce is made up of good performers who tend always to be good, poor performers who tend always to be bad, and another group always stuck in the middle. ”[ii]

Myth 3: Appraisal scores don’t drive pay or promotions. Managers are timid, so they give modest increases to their best performers and rarely hold back on increases for poor performers. In fact, they found the exact opposite. Mangers rewarded the best performers with higher pay increases and bonuses and held back from the worst performers, who were often fired.

What’s important is long term results

Being a credible researcher and academic, Peter Cappelli cautions that these results are only for one company. His advice is, before you toss out your performance management system, take a good look at its long-term results for your company.

In the companies I have worked for and consulted to, I have found that the best mangers differentiate performance and direct higher pay increases, bonuses, early promotions, and the most challenging projects to their best performers. Good managers know they have to attract, motivate, develop, and retain their best performers. It is their best performers who provide the highest business results.

Strong executives also know that their best performers will take on the most challenging projects: the company’s turnaround, the latest innovation, or the new start-up. They know that the best performers also have good communication skills, the agility to work with different cultures, collaborate well with team members, and show empathy. Challenging projects are fraught with risk and often include new business models, technology, culture and relationships. The best performers will not always succeed. Talent management systems need to account for this factor, and ensure that the company, as well as its top performers, learn from their failures as well as their successes.

While good mangers understand the need to reward performers, I have come across too many managers who apply the peanut butter approach: little differentiation in performance and rewards, and faint-hearted feedback. This leads to less than optimal performance and innovation, and employee turnover. All too often, bored top performers leave the company to find new challenges, more engaging leaders, and better pay.

In case you believe this blog offers subtle advocacy for using performance ratings, I am generally not a big fan. I and the empirical research find that, over time, they do more harm than good. Learn more.

I advocate, instead, that mangers build deeper relationships with employees and provide constant feedback, coaching, and more frequent recognition. I also advocate that executives build trusting, transparent, fast-moving and collaborative cultures of innovation within their companies.

What have you found? Is there a stable group of “A”, “B” and “C” performers from year-to-year? Or, is the performance of your workforce more dynamic? Have you already made, or are you looking at making changes to your performance management system? Join the discussion.

Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and is a Managing Partner of InnovationOne. He consults on talent management, leadership development and coaching, innovation, and other strategic initiatives. Please e-mail Victor at victorassad6@gmail.com or visitwww.victorhrconsultant.com. For innovation visit www.InnovationOne.US.

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One thought on “Performance Management Myths Debunked”

As this reflects only one company’s results, it’s hard to agree or disagree, However, I have worked for two companies wherein employees felt them to be a bad joke. In one company where I did evaluations, I thought so as well because I was told never to rank someone more than 3. That employee would end up making more than me – because I would never be ranked higher than a three. These evaluations determined what your pay increase would be and the company’s policy was never to award more than was necessary. ie. NO ONE would ever be ranked more than a 3. Working hard and consistently producing quality meant you were always on the same level as the employee who did as little as possible without endangering their score of 3.
Evaluations should only be done to help employees improve, especially when companies already have a set amount for yearly pay increases. Of course, this is assuming that managers are doing their job throughout the year and working with the poor performers to improve or to be let go if they don’t.